How do Google Ads work?

Imagine opening a store on a busy shopping street. You have an excellent product, an eye-catching storefront, and you’re ready to delight customers. But there is a problem: no one knows that your shop exists. Without promoting your new shop, people simply walk by without ever looking inside. 

This same scenario plays out online. Even the best website or the most innovative product stays invisible if it is not actively promoted. That’s where Google Ads comes in. It gives you the ability to target people who are looking for exactly what you offer. 

Google Ads work like a digital billboard, drawing the attention of potential customers to your store. Instead of waiting for potential customers to stumble upon your website by accident, your ads appear right when users are actively searching for the products you offer. 

In this article, you’ll learn how Google Ads work, the different types of ads available, and critical factors for successful campaigns. This allows you to increase reach, visibility and sales in a targeted manner, with precise control and measurable results.   

Why is paid advertising in search engines so effective?  

When you’re looking for a product or service, chances are you’re probably typing a term into Google and clicking on one of the first results. That’s where the strength of search engine advertising lies. Your ads appear specifically to users who are already interested and actively looking for a solution. 

Targeted reach instead of random visibility 

In contrast to traditional advertising, which often target broad groups (e.g. TV commercials or regular billboards), search engine advertising works precisely and is demand-oriented. Your ads only appear when a user searches for relevant keywords, at the exact moment when they’re most likely to make a purchase or decision. 

Fast results and high flexibility 

While SEO (Search Engine Optimisation) has a long-term effect, SEA (Search Engine Advertising) campaigns provide immediate visibility. Businesses can customise, test, and scale their ads at any time. Speed is a decisive advantage, especially for new products or limited time offers. 

Measurability and transparent success monitoring  

A major advantage of paid search engine advertising is the precise measurement of success: 

• The click-through rate (CTR) shows how often users respond to the ad 

• Conversion rate measures how many visitors make a purchase or take an action 

• Return on ad spend (ROAS) helps evaluate the profitability of the campaign 

This data can be continuously optimised so that the budget is used for the most effective ads. 

How do Google Ads work?  

Google Ads is based on an auction system where advertisers bid on keywords to place their ads in Google’s search results. Keep in mind that it’s not only the highest bid that decides the placement. The relevance and quality of the ad also play a central role. 

Pay-per-click (PPC): costs only for clicks 

Google Ads works on the pay-per-click (PPC) model, which means: 

• Advertisers only pay when a user actually clicks on their ad. 

• The cost per click (CPC) depends on several factors, including the maximum bid and the intensity of competition for the keyword. 

• This allows campaigns to be calculated precisely and the budget to be used in a targeted manner. 

This model is particularly efficient because advertisers only pay for actual interest in their ad and not for mere visibility. 

The auction principle: how ad ranks are determined  

As soon as a user submits a search query, Google conducts a real-time auction to figure out which ads are shown. Two factors play a role here: 

1. Advertiser’s bid: The maximum amount to be paid per click. 

2. Ad Quality Score: Google evaluates relevance and user experience (UX) based on several criteria. You can read more about Quality Score here: What is Quality Score in Google Ads 

The combination of bid and Quality Score determines the ad position. A high-quality ad may rank better than an ad with a higher bid but poorer Quality Score. 

The different types of Google Ads  

Google Ads offers different types of ads, each optimised for different marketing goals and audiences. The two main formats are search ads and display ads, both of which have specific benefits and uses. 

Search Ads: ads in Google search results  

Search ads appear directly in Google search results when users enter a relevant query. These ads look like regular search results but are marked with a small ‘ad’ label. 

Benefits of search ads: 

• High relevance, as they are played out exactly when users are actively searching for a product or service 

• Clear structure: headline, description and link to the landing page 

• Very good performance for conversion-based campaigns, as users already have a concrete interest 

When are search ads most effective?  

• For products or services with a high search demand 
• When users are actively looking for a solution to a problem 
• For listings that provide a direct and quick response to a search query 

Example: A person enters “best running shoes for beginners” into Google. An ad from a sporting goods retailer could address exactly this query and lead directly to the right product page. 

Display ads: visual banners on websites 

Display ads are graphic or animated banner ads that appear on millions of websites on the Google Network. They are not displayed in the search results but instead they are placed in the form of images or videos on suitable pages. 

Benefits of display ads:  

• Ideal for brand awareness: Users see the ads even without actively searching for the product 

• Ability to use visual content (e.g., product images, videos, animations) 

• Targeted based on user behaviour, interests, or websites visited 

When are display ads most effective?  

• To increase brand presence by making users perceive the brand multiple times 

• For retargeting to retarget visitors who have already shown interest 

• Visually appealing products that sell better through images and graphics 

For example, let’s say a user visited a travel deals website. A tour operator’s display ad could later retarget them on another page with a matching offer. 

Both ad formats have their own strengths. Search ads are perfect for direct purchase intent, while display ads are ideal for branding and recognition. Choosing the right format depends on the specific marketing goals and target audience. 

Shopping ads: product-specific ads for ecommerce  

Shopping Ads are specially designed for online retail and appear directly in Google search results as well as in the Google Shopping area. Instead of just showing a text link, these ads include a product image, the price, and the retailer’s name, making them particularly visually appealing and promotional. 

Advantages of shopping ads: 

• Potential buyers see the product directly with image and price 

• Higher purchase intent, as users often search for specific products 

• Automatic optimisation based on product data feeds 

When are shopping ads particularly effective?  

• For online stores that want to highlight their products directly 

• To increase the conversion rate with visual elements 

• When users have already made a purchase decision and are just looking for the right offer 

Example: A customer searches for “buy sports shoes” – Google directly shows him different models from different retailers with pictures and prices. 

Video ads: advertising on YouTube and others 

Video ads appear on YouTube and other platforms, either in front of a video, in the middle of it, or as a separate ad in video search. This format uses the visual and emotional potential of video to effectively convey brand messages. 

Benefits of video ads: 

• High attention and emotional impact 

• Large reach due to YouTube’s enormous number of users  

• Different formats possible (skippable ads, bumper ads, in-stream ads) 

When are video ads most effective?  

• To build branding through creative and impactful content 

• For products or services that require explanation  

• To target specific audiences on YouTube 

Example: A technology company launches a new smartphone – a video ad demonstrates the functions and reaches users interested in technology. 

App ads: ads to promote mobile apps  

App ads are specifically designed to drive downloads and engagement with mobile apps. They can appear on Google Search, the Google Play Store, YouTube, or the Google Display Network. 

Benefits of app ads:  

• Automatic optimisation for app installs 

• Reach users who are actively searching for new apps 

• Ads are displayed via various Google channels 

When are app ads most effective?  

• When launching a new app to gain a lot of users quickly 

• To increase in-app engagement through targeted campaigns 

• For businesses looking to expand their mobile presence 

Example: A fitness app is advertised. The app ad appears in Google search when someone searches for “fitness tracker app” and directly in the Play Store as a recommendation. 

Important factors for successful Google Ads campaigns  

An effective Google Ads campaign requires more than just posting ads. To achieve maximum visibility, high click-through rates, and profitable conversions, three key factors must be considered: audience targeting, keyword strategy, and proper budget and bidding management. 

Targeting the right audience 

The right audience targeting is crucial to ensure that ads are shown to exactly those users who are actually interested in the advertised product or service. Google Ads offers several ways to target precisely: 

• Demographic targeting: Selections based on age, gender, location, or interests  

• Remarketing: Reaching users who have already interacted with the brand  

• Audiences with purchase intent: People who are actively searching for similar products or services 

Best practices for successful targeting 

• Using Lookalike Audiences to attract new potential customers (lookalike audiences are those users with similar behaviours, interests, and demographics) 

• Adapting ads and landing pages to different audiences 

• A/B testing of audience settings for continuous optimisation 

Keyword strategy: relevance for the right ad placement 

Choosing the right keywords will determine when and where your ads appear. Only relevant search terms ensure that ads are displayed in a targeted manner and that no unnecessary costs are incurred. 

Keyword types:  

• Exact Match: Precise search terms for high relevance (“buy best running shoes”) 

• Phrase Match: Slight variations for more flexible playout (“Buy running shoes for beginners”) 

• Broad Match: Extended range, but with possible dispersion (“buy shoes”) 

• Negative keywords: These prevent ads from being displayed for irrelevant search queries.  

For example, a company that sells premium software might set “free” as a negative keyword to exclude users looking for free options. 

Best practices for an effective keyword strategy:  

• Regularly analyse search queries to optimise keywords 
• Using keyword planners to find relevant terms with high search intent 
• Combination of different keyword types to enable balanced targeting 

Budget: How much should you invest?  

A carefully planned budget and bidding strategy is essential to get the most out of a Google Ads campaign without incurring unnecessary expenses. 

Budget planning:

• Start with a test budget to collect initial data 
• Focus on keywords with a high conversion rate instead of pure reach 
• Dynamic adjustment based on performance 

Bidding strategies:

• Manual CPC bidding: More control over spending 

• Automatic Smart Bidding strategies: Google optimises bids based on user data 

• Maximise conversions: Optimise for as many conversions as possible 

Best practices for an efficient budget:  

• Use of bid adjustments for different target groups and devices 

• Continuous data analysis to optimise budget and bids 

• Scaling the campaign based on successful ad groups 

Google Ads offer a powerful opportunity for advertising 

Visibility is everything online, and Google Ads is one of the most effective tools to achieve it. By showing targeted ads to users actively searching for relevant products, Google Ads offers an advertising opportunity with high reach and measurable results. 

From search and display ads, to shopping, video, or app campaigns, Google Ads helps you address your target groups precisely and use your advertising budget efficiently. With smart targeting, a keyword strategy, and budget planning, you can boost clicks and conversions. 

What sets Google Ads apart is its flexibility: campaigns can be launched quickly, adjusted anytime, and continuously optimised with real-time data and insights. 

For successful online advertising, you can’t avoid Google Ads: an intelligent, data-based and targeted solution for businesses of all sizes. Now is the perfect moment to use Google Ads and grow your brand online!